Many of us don’t know debt collectors had a record year in 2020. Common sense would assume that this wouldn’t be the case due to the chaos Covid-19 caused. There are a few reasons why people like debt collectors boomed instead of failed.
The Backdrop of Covid-19
Last year, hundreds of thousands of people died. Millions lost their jobs or saw their businesses fail. Yet, debt collectors managed to have one of their best years ever.
Such a crisis would normally cause people to stockpile cash and avoid paying for non-essentials. During most recessions, most people default on their debts. Most of the nation’s courts shut down to stop the spread.
How The CARES Act Changed Things
The CARES Act resulted in higher unemployment benefits and stimulus checks. Many Americans found themselves with thousands of extra dollars in cash. This made them more willing to pay off their old debts.
As a result, some debt-buying companies have seen record profits. Their earnings growth was up more than 40%. Some claim their success was tied to the use of aggressive collection practices.
What Are the Debt Collection Agencies Doing to Profit?
Indeed, many debt collection agencies have a history of overly aggressive practices. They mass-produce lawsuits using robot-signed documents. Some experts estimate they file thousands of cases per week.
Usually, these businesses seek to garnish people’s wages. Many times people don’t show up to their case and lose by default. Even those on unemployment have their income garnished.
Debt collectors also harass people by calling consumers who owe them debt non-stop. Many debtors who have excess cash just give it over to escape the harassment.
Many debt-buying companies also hope that no further stimulus checks come soon. This will cause more people to fall into default, which means that that debt gets sold off to collections agencies.
How To Handle Debt Collectors
These are practices that are against the Fair Consumer Debt Collection Act. Calling someone many times or filing lawsuits to pressure them is not allowed. The FCDCA expressly prohibits getting contacted after requesting them to no longer do it.
It is better to request a letter stating the official amount you owe them. This letter should also show where the company’s location is. Keep a note if they are calling you with an automated dialer as this move is illegal. You can sue them and get them fined for it.
Most people also don’t know these companies are willing to accept less than the original debt. Collection companies buy the debt for pennies on the dollar. They are looking for a quick turnaround. Some money is better than no money and a drawn-out court battle.
Certain Types of Income Are Exempt to Garnishment
The heads of the household can claim protection against garnishment. Most states protect them up to between 90% and 100% of their wages. All it takes is filing paperwork in court. They can work with a law firm with experience in wage garnishment cases and can provide wage garnishment assistance.
Debtors can claim protection for other reasons:
- Income is needed for rent
- Income is needed for student loans
- Certain income stems from social security
- Income stems from public employee pensions.
Many don’t realize this when they see scary letters. They figure it is easier to settle and give away their unemployment or stimulus money. Federal law also prohibits more than 25% from getting garnished from one’s wages.
The CARES act offered no extra protections to the head of the household. This resulted in many checks getting garnished before the breadwinner could use them. Their family and community were unable to benefit from the purpose of the stimulus. That money went right into the debt buyer’s hands.
What to Do
Many of these practices are illegal or in a gray area of the law. If you need to get help handling debt collector harassment, you should look into getting a lawyer (more info in the link). Find one who specializes in fighting debt collectors. They usually work on a no-win-no-fee basis.
They can help you file for the head of the household exemption. You can also get guidance on how to object to garnishment in court. There are other options they can go over, too.
Wrapping it Up
Debt collectors add a lot of stress to a consumer’s life, and their practices are often borderline illegal. Last year they were greedier than ever. So, if you have been affected by them, know that there are ways to protect yourself.